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Internet industry: new economic engine amid recession?
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07:50, April 20, 2009

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For the Internet industry, the lingering global financial crisis has not been much dreadful, as most companies seem calmer in a time of real economy downturn.

Kai-fu Lee, vice president of Google, was optimistic about the company's performance in the first quarter of this year. The company saw 6 percent growth in business volume in the first three months over the same period last year, according to Google's quarterly report released Thursday.

"We've made significant profit despite slowing growth. The company is not severely damaged but only encounters deceleration in business expansion," he said during the annual conference of Boao Forum for Asia (BFA) held in the scenic Boao town of south China's Hainan Province.

The three-day forum ending Sunday, which attracted more than 1,600 politicians, business people and scholars and focused on the financial crisis, set a special section to discuss the Internet industry, which seemingly plays a more important role in combating crisis and stimulating the distressed real economy than before.

In the panel discussion "Another Winter for Internet? – Driving Growth Through Innovation", industry insiders gave positive views that as the Internet market expands with technology upgrading, the industry is providing a platform for innovation that will pump energy into other fields and in turn accelerate economic recovery.


In China, where the online population has exceeded 316 million, the market scale of the Internet industry has been expanding. The main sectors, such as online advertising, e-commerce and online games, are estimated to have surged by around 50 percent in 2008 over the previous year.

The government announced the details of a support plan for the information technology and electronics industry earlier this month, aiming to boost the industry by increasing state investment, credit support and export tax rebates.

The electronics and IT sector contributed 0.8 percentage points to China's gross domestic product (GDP) growth last year, and is expected to contribute at least 0.7 percentage points to the annual economic expansion from 2009 to 2011, according to the detailed plan.

New technologies help scale up the market, as 117.6 million Chinese people have gained access to the Internet through mobile phones. 3G wireless Internet is also seen as the next goal of most Internet companies.

Baidu, the most popular Web search engine in China, is now in talk with the country's mobile network operators for cooperation in the 3G business, the company's CEO Robin Li said at the BFA conference.

The 3G wireless network, supported by China's self-developed TD-SCDMA technology, is expected to effectively boost domestic demand for related technologies and products, expand the market and benefit the industrial chains as a whole.

Increasing orders for 3G mobile phones and mini notebooks have already boosted the recovery of China's manufacturing industry, according to Xi Guohua, vice minister of industry and information technology.

Ding Lei, chief executive officer of Netease.com. Inc, believed the development in 3G business "would bring a splendid vision".

"It means enormous opportunities for many Internet companies and would provide a platform that might give birth to even larger players in the industry," Ding said.


Actually, Internet companies have lent a helping hand to the real economy, especially to small and medium-sized enterprises (SMEs) with e-commerce and other innovative measures.

Alibaba, China's business-to-business (B2B) e-commerce giant, started a loan program last year together with eight domestic banks in the country's eastern Zhejiang Province where a great number of SMEs gather.

The loan support plan offers financing services to Alibaba's SME members with a certain credit level, which was decided by online credit and trading volume statistics from Alibaba's online trading platforms Taobao.com and Alipay.com.

The company has so far helped nearly 800 SMEs gain more than 1.5 billion yuan (about 219 million U.S. dollars) loans to overcome the impact of the global crisis, said Wei Zhe, CEO of Alibaba.

The survival rate of SMEs that have used e-commerce methods is four times higher than that of the rest ones, according to the company's survey.

Meanwhile, some migrant workers who lost their jobs during the recession started their own businesses on online platforms such as instant messengers and web forums, said Liu Chiping, executive director of Tencent.com, one of China's leading Internet companies.

He is confident that such innovative trend will continue as the government extends the construction of Internet-related infrastructure in the remote rural areas.

According to government's plan, Internet will become accessible to every village in the next three years to boost rural economy.

The government also plans to enhance the integration of Internet industry and the real economy to avoid another Internet bubble, Xi said.

Some industry insiders point out that the Internet industry might not be the major drive in the economic recovery.

Now the Internet industry is seen as a new tool to counter recession, but the industry alone is not able to solve the crisis, Kai-fu Lee said at the forum.

His opinion was echoed by Wei of Alibaba. "What we are providing are not bullet-proof vests but thick jackets that might help weather the economic winter," he said.

Source: Xinhua

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